John Maroney

The recommendations of the Quality of Advice (QOA) Review will make financial advice more accessible and affordable for consumers. That was the consensus of four industry experts at a Q-and-A session on the final day of the SMSF Association’s National Conference in Melbourne.

QOA Reviewer and Allens law firm Partner Michelle Levy said that the Review was not about keeping people happy. “It was about providing a framework in which financial advice can be offered in an affordable and accessible way – something I don’t think happens now.

“My recommendations are driven by consumer needs, and rest on a strong foundation of law that protects consumers. The reforms proposed will not open the door to the poor and harmful advice practices which led to the Hayne Royal Commission. Rather, they will lead to more consumers having access to personal advice that meets their needs – that is good advice.”

The QOA Review, an industry talking point for the past year, was the subject of a special plenary session, titled What happens next with improving the quality, accessibility, and affordability of the provision of financial advice? at the conference. The Inside Network’s Tahn Sharpe was the convenor.

The Review was instigated because of the complexity of the regulatory framework of financial advice, making it difficult to understand and comply with. Levy’s recommendations were handed to the Federal Government in December and released for discussion in February.

Financial Planning Association CEO Sarah Abood, describing the Review as a blueprint for the advice industry of tomorrow, said it proposed to take the industry from a tick-the-box approach to a principles-based system in which advisers are recognised as professionals and responsible. “It recognises the adviser is on the same side of the table as the client, and this can only be a good outcome.

“For example, we see the recommendation to abolish statements of advice (SOAs) as a positive step. These documents can be 100 pages long and are not read by most consumers. Indeed, the Review offers an opportunity to cut a lot of unnecessary costs.

“To reinforce Michelle’s (Levy) point, if a client rings up with a simple question, then they should be able to get a simple, low-cost answer. Certainly, we would suggest the quick implementation of some of the less contentious reforms as a matter of urgency.”

SMSF Association CEO John Maroney said the Review was a “once in a generation” opportunity to get a better financial advisory system that delivered better consumer outcomes.

“Although the Association has some reservations about the report, and, in particular, the pressing need for accountants to be included in the broader church of advice that the Review is advocating, we believe it has the potential to be a critical building block to a more professional advice industry.”

The professional services advisory company, AZ Next Generation Advisory CEO Paul Barrett, who believes implementing the reforms will immediately lift advice practices’ bottom lines 20 per cent, said professionalism was coming to the advice industry and it wasn’t waiting for the regulators or the policymakers.

“What this Review rightly does is challenge the regulatory thought process, of abandoning the tick-the-box mentality, and by doing so it is empowering advisers to be able to service their clients in a professional way – a brave new world. In my opinion, it will lead to advice practices that attract better talent, are bigger, more agile, and offer a greater array of services.”

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John Maroney

The decision by the Quality of Advice Review to largely overlook the role of accountants in delivering financial advice will be a hot topic when a four-member panel examines the Review’s final report at the upcoming SMSF Association National Conference.

Delegates to the three-day conference, being held at the Melbourne Convention and Exhibition Centre on February 22-24, will have one of the first public opportunities to ask Michelle Levy, Review lead and author, about her landmark report.

Due to the significance of this report for the advice industry, and the attention it has attracted since its release last week, the Association is also making this critical session open to members and other industry participants who register for virtual registration.

Association CEO John Maroney says: “It’s our view that accountants have been left in the cold in this Review, despite the fact we have a ready pool of specialists who are ideally placed to fill the crucial advice gap.

“In the context of improving access to quality advice we would have liked to see a greater focus on the role accountants can play, particularly in the SMSF advice space.”

“The limited licensing regime hasn’t worked and the accountant’s exemption before that also didn’t work so this has remained an unresolved issue for a long period of time, and we expect this issue to be fully aired at the conference.”

The session, on day three, will be facilitated by The Inside Network’s Managing Editor, Tahn Sharpe. Other members of the panel are Michelle Levy, Sarah Abood, CEO, the Financial Planning Association, Paul Barrett, CEO, AZ Next Generation Advisory and John Maroney CEO, SMSF Association.

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Michelle Levy

The landmark Quality of Advice Review final report released yesterday will be the headline act at the upcoming SMSF Association National Conference where review lead and author Michelle Levy will head a four-member panel, to dissect its findings.

Other members of the panel are Sarah Abood, CEO, the Financial Planning Association, Paul Barrett, CEO, AZ Next Generation Advisory and John Maroney CEO, SMSF Association.

The session, on day three of the conference that is being held at the Melbourne Convention and Exhibition Centre on February 22-24, will be facilitated by The Inside Network’s Managing Editor, Tahn Sharpe and will be one of the first opportunities for the report to be dissected/discussed in detail with the author since its release.

Maroney, commenting on the report, says: “We thank the Assistant Treasurer and Minister for Financial Services, Stephen Jones for releasing the Quality of Advice Review’s final report, believing the issues surrounding access to affordable and quality financial advice have been well documented throughout the report.

“We look forward to consulting with the government on the review and discussing many of the 22 recommendations in this report.

Despite some aspects of the terms of reference limiting the scope of the review, the size of the report and the nature of issues addressed highlight the diversity and complexity of the financial advice sector.

These issues present challenges for financial and professional advisers in providing advice and for consumers getting timely access to the advice they require at an affordable cost.

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John Maroney

The SMSF Association welcomes the findings from the Council of Financial Regulators (CFR) report that limited resource borrowing arrangements (LRBAs) pose no material risk to the superannuation or broader financial systems.

SMSF Association CEO John Maroney says: “In 2019, our response to the CFR was that an outright ban on LRBAs could be avoided by ‘mitigating’ risks to this SMSF asset class.

“What has occurred in the intervening three years reinforces our view that a ban on LRBAs would be overkill, with the report highlighting that SMSF borrowings remain a small percentage of total SMSF assets and, as such, pose little risk to financial stability while assisting many small businesses, in particular, meet their retirement income goals.”

The report also downplays another criticism of LRBAs – their impact on property prices – by stating they only comprise a small share of total housing credit.

Maroney says the ongoing viability of LRBAs is due, in no small part, to the integrity measures introduced in 2018, including changes to the total superannuation balance and non-arm’s length income rules (NALI).

“In our opinion these measures have greatly improved the system, helping ensure LRBAs are used responsibly.

That said, it is important for SMSF trustees considering an LRBA to get specialist advice as they can be complex arrangements which require carefully assessment of the risks, benefits and costs.”

Maroney says one-stop property shops advocating LRBAs and providing unlicensed personal advice remain a concern. “We have long supported a crackdown on their activities and believe ASIC has done much to curtail their nefarious activities. But the fact they still operate highlights the need for the entire sector to remain vigilant to ensure this debt instrument remains available to the vast majority who use it responsibly.”

Maroney concludes that LRBAs highlight the importance of quality of advice, and that  Michelle Levy’s Review, being handed down on 16 December, will hopefully bring more clarity to this. Certainly, for those attending the SMSF Association National Conference in Melbourne on February 22-24, they will have the opportunity to hear Levy and fellow industry experts discuss the findings and implications of the Review across the industry.

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John Maroney

SMSF Association CEO John Maroney says: “We do not and have never supported a cap on superannuation balances. The small number of SMSFs with extremely large balances are a legacy issue that the 2017 changes, which placed clear limits on contributions to superannuation funds and the amounts that can be held in the tax-free retirement phase, will remedy over time.

“It’s also our position that if there is a decision to restrict the retention of extremely large balances in superannuation, then needs to be handled carefully to ensure that any rule changes allow adequate time to manage the restructuring that would be involved, especially where large illiquid assets are involved. It also must not adversely affect the vast majority of SMSFs with moderate balances.

“We did suggest in 2020 that the Retirement Income Review examine the issue of extremely large balances, but deliberately did not recommend where that line should be drawn.”

Maroney notes the mooted change to impose a cap on superannuation balances conflicts with previous statements by the then Shadow Treasurer, Jim Chalmers, that “Labor will not introduce any new superannuation taxes or balance caps if it forms Government after the upcoming Federal election.”

“But if the Government has decided to have this conversation about balance caps, then it is one the Association and its members will actively participate in.

“In this vein we strongly support the announcement by the Assistant Treasurer, Stephen Jones, that Labor “will consult widely to inform a common, agreed objective for superannuation. Australians need to have their say. With an objective that is settled, we can talk sensibly about tax.”

“The Association has long supported the recommendation by the Financial System Inquiry to have an agreed common objective for superannuation, believing that if this foundation stone is put in place, then it will allow a far more productive conversation about the entire system, including balances.

“What must always be remembered is that constant changes to the superannuation tax settings erode confidence in the system and discourage members from making long-term savings plans.”

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John Maroney

As part of Scam Awareness Week, the SMSF Association is calling on its members to take a leading role in educating clients on the growing risk of scams and how to correctly spot and report.

Of the $4 billion expected to be lost to scams in Australia in 2022, it is estimated that losses due to investment scams will be the most significant, with $267 million in losses reported as at 31 August 2022. SMSF Association CEO John Maroney says: “As these investment scams continue to grow and become more sophisticated, they present a very real risk to our sector.

“Not only are SMSF trustees and self-directed investors often impacted by these scams, but major investments can be irreversibly damaged by scams and cyber-attacks. We’ve seen that with Medibank and Optus in recent months.”

Scam Awareness Week, which launched yesterday, highlights the need to have a more focussed conversation about the many different types of scams in circulation and what people can do to protect themselves from scammers.

Maroney says: “Our role is to raise awareness, encourage conversations and promote vigilance to safeguard SMSFs from this activity.

“This is why last year we launched our Scams Awareness website to help people identify common scams, explain how to report scams and to offer tips on how people can protect themselves from scammers.

We are calling on SMSF specialist advisers to take a lead role in understanding the warning signs and educating trustees and self-directed investors on scams, and to proactively reach out to clients and encourage them to report scams they may have heard about or experienced themselves.”

70 per cent of total losses reported to Scamwatch in the year to 31 August were investment scams, with losses involving cryptocurrency investments reported as one of the highest of all types of investment scams.

Maroney concludes: “The Association has an important role to play in protecting our community. We will endeavour to continue educating SMSF professionals, trustees, and self-directed investors on how best to protect their retirement savings.”

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John Maroney

One of the key takeaways from the last two years globally has been the benefit of knowledge-sharing to rapidly discover, develop and advance. The SMSF Association is tapping into this concept with their Hivemind themed National Conference being held at the Melbourne Convention and Exhibition Centre on February 22–24.

Hivemind is the collaborative approach to information sharing, with participants coming together as a community to contribute as much as they gain, in order to collectively strengthen their knowledge and expertise.

SMSF Association CEO John Maroney says: “Speaking with members over the past year, it has become apparent that attending our National Conference and hearing from some of the brightest minds in the SMSF industry, as well as having these unique networking opportunities facilitated, is of great benefit to their careers.

“In having access to this vibrant community and wealth of knowledge, our members are stronger together.

Attending National Conference sets up attendees to be able to best educate their clients on key issues such as a death in the family or preparing for retirement.

“It not just a matter of examining these issues from a regulatory or tax perspective. They are often complex and emotional issues and as such there are often ethical considerations as well.

“In devising the 2023 content, we have ensured a well-rounded program to best support our attendees working in the superannuation advice sector.”

“Many of the strategies covered in the sessions are equally relevant to members of APRA regulated funds.”

“So even if you don’t currently provide SMSF advice or have SMSF clients, from a technical knowledge and networking perspective, there is still much to gain from attending our National Conference – and off course learning more about the new opportunities SMSFs can provide”, Maroney said.

The Quality of Advice Review – the final report is due in December – will also come under the microscope with a panel session being devoted to discussing its recommendations.

Allens Partner and Quality of Advice Reviewer Michelle Levy will lead the four-member panel also comprising Sarah Abood, CEO, the Financial Planning Association, Paul Barrett, CEO, AZ Next Generation Advisory, and Maroney. It will be hosted by The Inside Network’s Managing Editor, Tahn Sharpe.

Maroney says: “The Quality of Advice Review is a session that we felt was a pivotal inclusion on the agenda and that a panel discussion was the best format to allow the audience to ask questions of industry leaders such as Levy. We had the same format at the Technical Summit held in late July and it proved extremely popular with members.”

Other regular sessions will be SMSF Association Deputy CEO/Director of Policy and Education, Peter Burgess, kicking off the conference with his traditional legislative update session and Heffron Consulting, Manager Director, Meg Heffron’s very popular strategy update session aptly titled “Why Bee in an SMSF?”

Register for early bird rate. 

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John Maroney

The Federal Budget, the second for 2022 and the first by the Albanese Labour Government, has delivered certainty for the SMSF sector.

Key Points

Three-year SMSF audits policy cancelled

In the 2018-19 Budget, it was proposed to introduce a three-year audit cycle for SMSFs that met prescribed criteria. It was a controversial measure that contained a range of complexities and concerns for the sector. The annual audit process plays a pivotal role in maintaining the integrity of the sector. “Although this measure failed to progress beyond the Budget pronouncement, it is pleasing to see that it has officially been axed.”

Relaxing of SMSF residency deferred

The Government will defer the start date for the proposed relaxing of the residency requirements for SMSFs announced in the 2021-22 Budget. These measures will now start on or after the legislation becomes law. They were scheduled to start from 1 July 2022. The SMSF Association has actively engaged with the Government on this issue. “Although the delay is disappointing, it is pleasing to see that the issue remains on the Government’s policy agenda.”

Budget silent on Non-arm’s length income (NALI) / Non-arm’s length expenditure (NALE) and legacy pensions

Two issues of importance to the SMSF sector, NALI and legacy pensions, were not mentioned in the Budget papers.  With legacy pensions, an amnesty period to allow SMSF members stuck in legacy pensions to convert to more conventional style pension products would be a significant reform. The NALI/NALE rules, which took effect on 1 July 2018, could have far-reaching and unjustifiable consequences for all superannuation funds, including SMSFs, and we have long advocated the need for reform. We will continue to engage with Government and Treasury on these two important issues.

By John Maroney, CEO, SMSF Association

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John Maroney

The Federal Government’s compensation scheme of last resort (CSLR) provides an important, new layer of consumer protection, says SMSF Association CEO John Maroney.

“The Association has consistently supported measures seeking to improve consumer protections and welcomes the proposed scheme.”

The CSLR provides a level of compensation for victims of unpaid Australian Financial Complaints Authority (AFCA) determinations.

“However, the decision to exclude Managed Investment Schemes (MIS) from the CSLR is a concern. Historically, these failed schemes have had an enormous financial impact on those consumers caught up in them, including self-managed super funds (SMSFs).

“The financial devastation they can cause to unwitting consumers was well documented in a Senate Inquiry in late 2021 that examined the Sterling Income Trust collapse. Most of the victims were elderly Australians yet under this proposed compensation scheme they will be excluded.

“In the same way it will exclude consumers from First Nations communities who lost thousands of dollars invested in funeral insurance policies after the collapse of the Aboriginal Community Benefit Fund.”

“Further back, the collapse of Trio Capital in 2009 saw a Parliamentary Joint Committee Inquiry held to examine it as well as other related matters. With all the issues the common thread was a lack of consumer protections that were highlighted by our Association and other organisations.

“In the case of Trio Capital, a responsible entity for 28 MIS, SMSF members lost considerable amounts of money due to the fraudulent activities of the scheme operator.”

“Exposure to fraud resulted in significant losses for direct investors and superannuation funds. The superannuation funds involved included both large APRA funds and SMSFs. In total, 415 direct investors and 285 SMSFs had no access to compensation.”

Maroney says the Financial Services Royal Commission made a wide-ranging compensation scheme one of its key recommendations.

“But the compensation scheme outlined in these four pieces of legislation does not incorporate the spirit or intent of the Royal Commission’s recommendation, and, as such, is failing the ordinary Australians who fall victim to failed MIS.

“We urge the Government to revisit the legislation with the aim to expand its scope so that MIS victims are included.”

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John Maroney

The SMSF Association is urging the Federal Government to address two critical issues – legacy pensions and extending the temporary absence rule for non-residents – in its 2022-23 Federal Budget.

In its Budget submission, the Association CEO John Maroney says: “We would like to highlight several key measures announced in Budget 2021-22 that remain outstanding and are significant for the SMSF sector.

“They relate to the two-year amnesty for legacy pensions conversions and the removal of the active member test and the extension of the temporary absence rule for non-residents from two to five years. Both measures were intended to apply from 1 July 2022.

“These measures are important reforms for the SMSF sector, and we ask the Government and Treasury to undertake the necessary industry consultation and progress the required legislation as a priority.”

Maroney says the overarching themes of this submission are simplification, review, and the modernisation of the sector. Within this framework, eight issues have been identified where this can be achieved. They are:

• Simplifying Transfer Balance Caps. The indexation of the TBC on 1 July 2021 has added more complexity. The system has shifted from having a single cap to individual caps ranging from $1.6 to $1.7 million, causing confusion and increased costs. A single cap will benefit all stakeholders.
• Reduce the number of Total Super Balance (TSB) thresholds. The introduction of multiple TSB thresholds has added to super’s complexity, so reducing their number would be an important reform.
• Rewording or modifying the non-arm’s length income (NALI) provisions with new principles.  The introduction of the non-arm’s length expenditure (NALE) rules from 1 July 2018 will have far-reaching and unjustifiable consequences for superannuation. The rules should be re-worded or re-drafted to require the Commissioner of Taxation to decide that the section applies and to allow trustees to rectify transactions in certain situations.
• Removing the cancellation fee that applies to approved SMSF auditors. This will provide equitable treatment with registered company auditors and removes a significant financial barrier to exit.
• Removing ambiguity regarding the application of the design and distribution obligations and target market determinations to SMSFs. These provisions should not apply to establishing an SMSF, adding a new member, or when starting a pension.
• Indexing key small business capital gains tax concession thresholds. Some of these thresholds have not been reviewed or updated for a considerable period.
• Protecting an individual’s unused concessional contributions cap: Under this measure the Commissioner of Taxation would be given the necessary powers to apply such amounts to the relevant year of income.
• Providing practical regulatory and compliance relief for minor breaches of the non-geared unit trust rules. Currently remediation is strictly limited to the winding up of the unit trust that can be costly and have a severe impact on the fund. Temporary measures adopted by the Commissioner of Taxation due to Covid-19 have demonstrated that such a framework, with the right setting, can function appropriately.

Read the SMSF Association’s 2022-23 Federal Budget submission.

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